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IEA World Energy Outlook 2006: Business-as-Usual is “Dirty, Insecure and Expensive”

7 November 2006

In its just-released World Energy Outlook (WEO-2006), the International Energy Agency forecasts that under a business-as-usual reference scenario, world primary energy demand would increase by 53% between now and 2030, and global carbon dioxide emissions would reach 40 Gt, a 55% increase over today’s level.

More than 70% of the increase in demand will come from developing countries, led by China and India. World oil demand reaches 116 million barrels per day in 2030, an increase of 38% from 84 mb/d in 2005. Most of the increase in oil supply is met by a small number of major OPEC producers; non-OPEC conventional crude oil output peaks by the middle of the next decade.

China overtakes the United States as the world’s biggest emitter of CO2 before 2010. These trends would accentuate consuming countries’ vulnerability to a severe supply disruption and resulting price shock. They would also amplify the magnitude of global climate change, the Agency notes.

WEO-2006 reveals that the energy future we are facing today, based on projections of current trends, is dirty, insecure and expensive. But it also shows how new government policies can create an alternative energy future which is clean, clever and competitive—the challenge posed to the IEA by the G8 leaders and IEA minister.

—Claude Mandil, Executive Director of the IEA

An Alternative Policy Scenario projects that the energy future can be substantially improved if governments around the world implement the policies and measures they are currently considering.

In this scenario, global energy demand is reduced by 10% in 2030—equivalent to China’s entire energy consumption today. Global carbon-dioxide emissions are reduced by 16%—equivalent to current emissions in the United States and Canada combined—in the same time-frame.

In the OECD countries, oil imports and CO2 emissions peak by 2015 and then begin to fall. Improved efficiency of energy use contributes most to the energy savings. Increased use of nuclear power and renewables in the IEA projections also help reduce fossil-fuel demand and emissions.

Just a dozen specific policies in key countries account for 40% of the reduction in global CO2 emissions. The shifts in energy trends described in this scenario would serve all three of the principal goals of energy policy: greater security, more environmental protection and improved economic efficiency.

The good news is that these policies are very cost-effective. There are additional upfront costs involved, but they are quickly outweighed by savings in fuel expenditures. And the extra investment by consumers is less than the reduction in investment in energy-supply infrastructure. Demand-side investments in more efficient electrical goods are particularly economic; on average, an additional $1 invested in more efficient electrical equipment and appliances avoids more than $2 in investment in power generation, transmission and distribution infrastructure.

—Claude Mandil

The energy picture has changed appreciably since the 2004 Outlook, according to the IEA. The realities of the energy market have become harsher and the relative competitive position of fuels has changed. Oil and gas prices this year have been between three and four times higher than in 2002 and this is reflected in a new oil price assumption for the projections.

WEO 2006 identifies under-investment in new energy supply as a real risk.

—Claude Mandil

The Reference Scenario projections call for a cumulative investment in energy-supply infrastructure of more than $20 trillion in real terms over 2005-2030—substantially more than was previously estimated. Roughly half of all the energy investment needed worldwide is in developing countries.

It is far from certain that all this investment will actually occur, according to the IEA. There has been an apparent surge in oil and gas investment in recent years, but it is, to a large extent, illusory. Drilling, material and personnel costs in the industry have soared, so that in real terms investment in 2005 was barely higher than that in 2000.

The Outlook suggests that nuclear power could make a major contribution to reducing dependence on imported gas and curbing CO2 emissions in a cost-effective way. But this will happen only if the governments of countries where nuclear power is accepted play a stronger role in facilitating private investment, especially in liberalized markets, according to the report.

Biofuels can make a significant contribution to meeting future road-transport energy needs, helping to promote energy diversity and reducing emissions. Biofuels reach 4% of road-fuel use in the Reference Scenario in 2030 and 7% in the Alternative Policy Scenario, up from 1% today.

The United States, the European Union and Brazil account for the bulk of the global increase and remain the leading producers and consumers of biofuels in both Scenarios. But rising food demand, which competes with biofuels for existing arable and pasture land, and the need for subsidy in many parts of the world, will constrain the long-term potential for biofuels production using current technology.

New biofuels technologies being developed today, notably lignocellulosic ethanol, could allow biofuels to play a much bigger role, the report argues, if major technological and commercial challenges can be overcome.

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November 7, 2006 in Climate Change, Fuels, Oil, Power Generation | Permalink | Comments (4) | TrackBack (0)

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Comments

Humans and bacteria, we have more in common than anyone would like to admit. In the next 30 years we'll find out if we're any smarter than bacteria. We'll either breed, consume and pollute ourselves into a massive die-off or we'll grow up and learn to get beyond our animalistic urges. If we can get past the population hump the future will be great. We're about to live in interesting times.

I think the die-off theory is largely pinned on the assumption that Americans would rather starve to death than surrender their gas guzzling SUVs. I believe that strains the imagination not to mention the fact that it contradicts history. During the previous oil crises, even oil hungry American were persuaded to buy smaller vehicles.

Furthermore, I'd like to point out the fact that most American families have more than one car. Therefore, not all cars have to be replaced before most families have a more efficient option for the bulk of their driving.

I believe this latest outlook (having read just this post) shows that IEA is slowly coming to their senses. In Europe IEA is generally regarded as the most authorative source for energy information and future projections. As such, their past projections that favoured oil and coal gave politiciant an excuse for not taking an aggressive stance against the tripple problem of pollution, green-house effect and security of supply. But now they are outright saying that investment in energy efficiency saves a lot of money, often from day one. That pretty much removes the last bit of excuse for not trying to reduce energy consumption, or at least accelerate the growth in GDP/kWh.

Any die-off I'm talking about is not limited to oil supplies, I'm talking about over-population, environmental degredation and all resources especially food. Sub-saharan Africa is already affected by all of these factors. I'm sure Americans will give up their SUVs before they starve. Will they give them up before much of the rest of the world starves?
I am optomistic that we can make it past the population hump, we just need to pull together and use our heads not our hormones. (It's brains vs. greed and ingnorance)

Neil:

Bacteria may be smarter than we think. They have been around much longer than humans and may be around much longer than us.

Pollution level does not necessarily have a direct relationship with population. In some very well know areas a mere 3% of the world population produces 30+% of the world total GHG. That is 10 times the world average.

A typical North American produces 2 to 3 times the GHG than a German and consumes almost 3 times the energy than a typical European.

With the appropiate cultural changes, America (USA) could support 1+ billion people while consuming about the same energy and producing a lot less total GHG.

The first step may have been taken yesterday.

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